Steel, auto, chemicals to gain from more LPG flow

The govt on Friday moved to cushion key industries from the ongoing gas supply disruption, boosting commercial LPG allocations by 20% to reach 70% of pre-crisis levels. The extra supply will prioritise labour-intensive sectors such as steel, automobiles, textiles, dyes, chemicals, and plastics, which are critical for broader economic activity.

The move is aimed at stabilising industrial operations, said Prashant Vasisht, senior vice president (corporate ratings) at ICRA, adding that increased domestic LPG production and alternative imports have “reduced the deficit, providing some comfort.”




Pankaj Chadha, chairman of engineering exports body EEPC India, said the measure will help steel mills, particularly smaller units, maintain production. “Steel is a key segment of the engineering goods sector, and its shortage could severely impact the production chain. The additional LPG allocation should minimise supply bottlenecks and ensure steady output,” he added.

The garment sector, however, sees the step as partial relief but doubts it will meet even half of its near-term demand. Yarn processing, crucial for garment production, is largely gas-powered. Supply to hundreds of units in Tiruppur has been cut for 10 days, affecting around 1 lakh employees. The shortage has disrupted the credit cycle and risks favouring well-capitalised buyers, while costs for raw materials, including polyester yarn, and transportation have increased. Alexander Neroth, director of NC John Garments, said, “Freight and raw materials costs have risen substantially, making it difficult to get yarns processed.”

The gas shortage started with the West Asian conflict and the near-closure of the Strait of Hormuz to commercial shipping, prompting the government on March 12 to curtail commercial LPG allocations to 20%. Since then, allocations have gradually increased to 70% of pre-crisis levels.

Access to the additional 20% is conditional. Industrial users must register with oil marketing companies such as Indian Oil Corporation, HPCL, and BPCL, and apply for piped natural gas connections with city gas distribution entities to qualify. Process industries and units relying on LPG for specialised heating needs, where natural gas cannot substitute, will get priority.

Manufacturers across sectors are adapting to the shortage with various measures to maintain production. Ajay Singhania, MD of EPACK Durable, noted that LPG and piped gas shortages had cut production by nearly 50% over the past three weeks. “We have initiated interim measures like partial fuel-switching across processes, but these come with efficiency and cost trade-offs. For the consumer durables sector, where demand is seasonal, consistent energy availability is critical to ensure timely production,” he said.

Auto component makers, particularly forging and casting units, continued production with some shifting to in-house solar powered electrical heating. A Chennai-based exporter said the transition to renewable energy helped in navigating the situation with relative ease, even as inventories have fallen from 15–20 days to 2–3 days. Smaller firms, he added, are feeling the strain due to heavier dependence on LPG.

(With contributions from Reeba Zachariah, G Balachandar, Vaitheeswaran B and Asmita Dey)
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